In recent months, the Commonwealth Bank of Australia (ASX: CBA) share price has surged, significantly outperforming the broader market represented by the S&P/ASX 200 Index (ASX: XJO). With such robust growth, investors are left pondering whether the bank's shares still present a viable investment opportunity, especially considering its elevated price/earnings (P/E) ratio, which now hovers above 20.


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The Run-Up in CBA Share Price

Over the past six months, CBA shares have seen a remarkable ascent, climbing by 17% compared to the ASX 200 Index's 11% increase. This impressive performance has undoubtedly caught the attention of investors seeking lucrative opportunities in the ASX banking sector.

Expert Opinion: Arthur Garipoli's Assessment

Arthur Garipoli, a respected financial analyst from Seneca Financial Solutions, recently shared his insights on the CBA shares. In a detailed analysis published on The Bull, Garipoli expressed a cautious outlook, labeling Australia's largest bank as a sell.


Garipoli's assessment was based on the bank's FY24 third-quarter results, which, although slightly better than expected, revealed concerning trends. Specifically, Garipoli highlighted a decline in net interest margins, lower revenue growth, and increasing cost pressures. Despite acknowledging CBA's premier status in the banking sector, Garipoli questioned the justification for its valuation premium compared to competitors, advising investors to consider taking profits.

Quarterly Performance Snapshot

In its latest financial report, CBA disclosed a quarterly profit of approximately $2.4 billion, marking a 5% year-over-year decline. The bank attributed this decrease to a loan impairment expense of $191 million, with provisions for collective and individual impairments registering slightly higher figures. While CBA emphasized the overall soundness of its lending portfolio's credit quality, it acknowledged moderate increases in consumer arrears and corporate troublesome exposures.

Valuation Comparison: CBA vs. Peers

A crucial aspect of evaluating CBA shares is comparing their valuation to that of other major banks listed on the ASX. The P/E ratio serves as a convenient metric for this purpose.


According to independent forecasts on Commsec, CBA shares are currently trading at a P/E ratio of 21x FY24's estimated earnings. Contrasting this with its peers, we find significant disparities:


- ANZ Group Holdings Ltd (ASX: ANZ): P/E ratio of 12.6x

- Westpac Banking Corp (ASX: WBC): P/E ratio of 14.5x

- National Australia Bank Ltd (ASX: NAB): P/E ratio of 15.4x


The surge in the CBA share price undoubtedly reflects investor optimism regarding the bank's future prospects. However, caution is warranted, especially given the elevated valuation compared to its peers. Arthur Garipoli's sell rating underscores the importance of thorough analysis before making investment decisions.


As with any investment, it's crucial for investors to conduct their due diligence, considering factors such as the bank's financial performance, market dynamics, and long-term growth prospects. While CBA's status as Australia's premier bank commands attention, prudent investors may opt to weigh the risks carefully, especially amidst evolving economic conditions and regulatory landscapes.